A BEJM Topics article.

Abstract

This paper examines the effect of vertical diversity in workers' skill on the long-run growth rate of an economy. It uses a two-sector model where the technology of the consumption-good sector is supermodular and that of the R&D sector is submodular. By adopting Grossman and Maggi's (2000) model to a framework of growth, it shows first that diversity is conducive to growth. As the main innovation, a notion of communication gap is introduced among workers. It is shown that if vertical diversity is sufficiently high relative to the communication gap, the growth rate may not increase with diversity; there may be an inverse-U shaped relationship.

Submitted: June 9, 2005 · Accepted: October 19, 2005 · Published: November 23, 2005

Originally published in Topics in Macroeconomics.

Recommended Citation

Das, Satya P. (2005) "Vertical Diversity, Communication Gap and Equilibrium Growth," Topics in Macroeconomics: Vol. 5 : Iss. 1, Article 22.
Available at: http://www.bepress.com/bejm/topics/vol5/iss1/art22